Poorest will be hit hardest by spending cuts, warns IFS

Poorer families and those who benefit most from public services will be hardest hit by chancellor George Osborne’s “regressive” spending review, experts have warned.

The Institute for Fiscal Studies, which produced its own analysis of the spending review today, said that the impact of the tax and benefit changes to come from 2011-12 to 2014-15 will proportionately slash the incomes of the poorest half of households more than the richest half.

The only exception is the richest 2% of the population who are the hardest hit overall as a result of tax increases announced by the previous government that the coalition government is implementing.

Emmerson said: “The tax and benefit changes are regressive rather than progressive across most of the income distribution.”

Emmerson added that the Treasury’s own analysis showed that the same applied to the impact of cuts to public services on the population. Again those in the bottom half of the population will be hit harder than those in the top half as a proportion of income.

Welfare spending will be cut by £18bn a year between now and 2014-15 on the back of measures announced in yesterday’s spending review and the Budget in June.

Emmerson said the cuts meant benefits would be focused more on pensioners and less on families with children.

Children’s Society chief executive Bob Reitemeier said: “Hitting the bottom half of the population hardest is not fair and is completely out of step with the national target to end child poverty within a decade in this country. There are 3.9m children living in poverty now and Britain should be doing everything in its power to reduce this figure.”

Emmerson said he was most concerned about changes to council tax benefit, which is to be replaced by a grant given to local authorities who will be able to decide how best to use it.

He added: “It will make the benefits system more complex and less transparent. It will also make it harder to make the benefit system fit together better as a whole.

“The incentive it provides to local authorities to encourage low-income people to move elsewhere is undesirable.

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